the 5 questions saas cfos should ask their controller

W H I T E P A P E R

The 5 Questions SaaS CFOs

Should Ask Their Controller

Table of Contents

Introduction ………………………………………………………………………… 3

Q1: How many journal entries are we making during the closing process? … 4 Q2: Have you reviewed compliance with local jurisdictions? …………………. 5 Q3: How long does it take to close our books? What’s holding things up? .… 6 Q4: Are we still using Excel? If so, why? …………………………………..……. 7 Q5: Can we integrate our financial information and our operating metrics? .... 8 Conclusion ………..………………………………………………………………… 9

The 5 Questions SaaS CFOs Should Ask Their Controller 2

Introduction

The new mandate for SaaS controllers—and CFOs

As the office of the SaaS company controller becomes ever more strategic—creating higher levels of

financial visibility to help drive growth and profitability—the financial organization’s relationship to the

controller role must evolve as well.

Specifically: Today’s CFO needs to work closely with the controller to ensure that, one, the organization

gets the full benefit of the controller’s talents and knowledge and, two, the controller’s office is operating

at the highest levels of efficiency and accuracy. Ask your controller the following five questions to initiate a conversation around best practices.


An excessive number of manual journal entries needlessly extend a closing period—and can also be a

leading indicator of lurking problems. They can conceal anomalies and errors that actually have broad,

systemic roots. You may be plagued with variable accounting processes—or a level of complexity that

calls for revised standards.

To optimize the closing process and reduce the incidence of manual journal entries, you and your

controller can consider implementing these best practices:

• Integrate the item catalogs between Salesforce.com and your financial system: having

integrated billing and revenue recognition from the line items in your Salesforce.com orders can

immediately assign dimensions to orders that immediately makes automated Journal Entries for you

• Create comprehensive policies: First, carefully define and document your accounting policies in

Quote-to-Cash and Procure-to-Pay. A growing company’s policies often evolve ad hoc. Auditors,

however, want clear, coordinated policies, rules, and procedures that everyone follows—especially

when there are complex, nuanced issues such as revenue recognition, commissions, expense

amortization, and billing. • Work with auditors: What exceptions are they uncovering? Your auditors can be an excellent source

of external feedback. Review your accounting policies with them, particularly around the ASC 606

revenue recognition rules —and seek their agreement prior to the actual audit. Also, consider

grouping your key transactions together, with policies documented, to speed the audit review and

minimize objections and questions. • Formalize the process of manual journal entries: You won’t eliminate manual journal

entries—nobody can—but you may reduce them by formalizing the process. Part of the answer

is automation, which will help enormously. But you should also devise rigorous processes that

discourage manual entries, and ask your team to seek alternative ways to account for recurring

period-end adjustments. • Store documentation with manual entries: Require that the accounting team capture and store

supporting documentation alongside each manual entry, particularly with new subscription contracts

when you will need to track your execution on your performance obligations. Months later, when

questions about long-ago transactions arise, you’ll be able to quickly, efficiently retrieve answers.

And that boosts your auditors’ confidence.

Key takeaway: Use audit difficulties and exceptions to identify areas

needing policy definition, process improvement, and automation.


Q1

How many manual journal entries are we making during the

closing process?

Q2 Have you reviewed compliance with local jurisdictions?

As one of the few people with a direct role in virtually every transaction that flows through the corporate

accounting structure, the controller can—and should—play a central role in identifying and minimizing the

company’s risk exposure. This is especially critical for growing technology companies, whose regulatory

compliance risks steadily increase in magnitude and quantity over time. The following best practices can

help your controller steer your company clear of unnecessary risks. • Create a risk framework: Assemble a team to identify the most likely sources of risk, including regulatory

compliance with ASC 606 and GDPR, and develop plans and processes to limit your company’s exposure

and mitigate the effects of a failure. Give the controller a leadership role, and review this plan together

often. • Conduct regular risk reviews: Create a series of checkpoints, duties, and regular meetings to stay

apprised of the above efforts and to review new and evolving compliance requirements and related

financial controls. For instance, you can review everything from insurance policies to contract sizes in

a regular meeting. Every person in the company has some role to play in safeguarding the company

against risk. Operate under the principle of “trust but verify.” • Ensure local jurisdiction compliance: As your organization expands to multiple jurisdictions, through

international expansion, acquisitions, and changes of control, the complexities multiply. The primary

challenges involve taxation—including corporate taxes and payroll.

An international presence adds still more complexity. You and your controller must give careful

thought to how local entities are created and operated so you can minimize tax impacts and ensure

proper compliance.

Key takeaway: Create a central review process to ensure the right

controls are in place.


Q3

How long does it take to close our books?

What’s holding things up?

The best measure of controller efficiency is how quickly and accurately the team closes the books. Start

with strong planning and preparation, such as handling all billing and expense issues prior to the period-

end. Automation is also essential—it provides the desired speed, efficiency, and accuracy without

increasing staffing levels.

A fast close enables the accounting and finance team to move beyond merely reporting results and into

forward-looking activities that can shape future outcomes. You and the executive team need financial

information as soon as possible to make any necessary course corrections. This information includes

traditional financial statements (income statement, balance sheet, and statement of cash flows) as well

as SaaS metrics, operational reports, detailed analyses of business results, forecasting, and what-if

FP&A analysis.

• Create a closing scorecard: In addition to tracking the number of manual journal entries, monitor

the number of expense reports, accruals, bills, and invoices that your finance team must process.

Consider creating a simple scorecard to measure your progress and to understand where the

bottlenecks are occurring. • Create a flash close report: To buy the team a little time and appease investors, lenders, and

executives—who typically want period results immediately—consider creating a one-page “flash

close report” in as little as two days (as compared to the 10-15 business days most accounting

teams require to close their books). This report can cover 10-12 key metrics and balances, such as

revenue, bookings, CLTV, CAC, CMRR, AP, AR, DSO, cash balance and burn, key customer adds

and churn, and others. • Automate for speed: In general, manual entries and workarounds are red flags for auditors

because they are an open invitation to policy deviations. Automated processes enforce your

accounting policies—while also increasing closing speed and reducing errors. • Know the forecast: Knowing the next quarter’s forecast better enables the controller to spot errors

and issues because unexpected actual results (positive or negative) will stand out, particularly in

times of growth, whether organic or inorganic. The controller can then investigate and provide

commentary prior to closing the books. When the accounting team is able to detect problems early, it

simplifies matters for the finance executives and the board.

Key takeaway: Create a repeatable close process that all of the

stakeholders are bought into.


Q4 Are we still using Excel? If so, why?

The continued use of Excel may reflect a sort of “inertia” based on inexperience with other tools, or just

plain comfortable familiarity. While there are many reasons to limit Microsoft Excel use in corporate

accounting—such as its inherently breakable models, security issues, and lack of shareability—it can

still be useful to controllers in certain situations. Love it or hate it, Excel has been—and will likely

remain—one of the go-to components in every accountant’s toolkit. Just make sure you’re clear on why

you are using it.

Some of the best practices for using Excel include:

• For isolated tasks: No company should rely on Excel as its financials backbone. However, for tasks

such as manual journal entries, sub-ledgers, prepaid expenses, deferred revenue, and support

schedules, Excel can serve a limited purpose—so long as you base these activities on data from your

primary financial system. • As an ad hoc reporting tool: It’s OK to use Excel as an ad hoc tool to accept data exports from

your financial system for some off-program analyses, modeling, and simulations. But a company’s

financial “truth” should always come from a system that stores all data. When a colleague emails you

a spreadsheet that has conflicting or outdated data, you’ll spend more time reconciling the numbers

than acting on the information. • For ancillary reporting: Multi-user corporate accounting systems have their own native reporting

facilities, but sometimes controllers prefer the familiarity of Excel for reconciliation reports, creating

flash reports at period end, modeling various forecast scenarios, and similar forward-looking reports.

There’s little downside to doing so.

Key takeaway: Excel can be a valuable tool for specific, limited purposes.


Q5

Can we integrate our financial information and

our operating metrics?

Because many financial systems can now accommodate analyses of operating metrics from

statistical accounts to create a richer, fuller picture of the business, the controller is assuming a

role as the provider of financial visibility—once the domain of financial planning and analysis

(FP&A) teams or the CFO.

Merging financial data and operational metrics could help your organization in the following ways:

• Spot the opportunities: By virtue of their intimate involvement in virtually every accounting

transaction, controllers have a unique perspective on corporate performance—and should be able to

identify subtle (and not-so-subtle) opportunities to maximize revenue and minimize expense. • Emphasize operational metrics: The rising importance of operational metrics gives controllers the

ability to collaborate with other areas of the company to manage their functions in non-financial

terms. Examples include CLTV, the Rule of 40, CMRR, customer acquisition cost, churn, and more.

Ultimately, these operational metrics reconcile 100-percent with GAAP financials. • Establish the financial truth: A single, merged reporting system, across Salesforce.com and your

financial system, ensures everyone works from the same playbook. If you have two or more

reporting systems, you will spend unproductive time reconciling differences and untangling

conflicting definitions. Revenue may be reported differently for GAAP, sales compensation, and

board reporting purposes but should all be sourced from the same system.

Key takeaway: Implement a single reporting system to eliminate

unproductive reconciliation time.


Conclusion

Exploring the answers to these five questions with your controller will help create a stronger, more

effective financial structure. In fact, your entire organization will benefit from a finance team that

understands and controls sources of financial risk, implements more efficient processes, and develops

deeper insight into both the financial and operational metrics of the business to drive better decision

making, better informed board meetings, and better executed strategy.

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